FATCA and private client
FATCA and private client

The following Private Client guidance note provides comprehensive and up to date legal information covering:

  • FATCA and private client
  • What is FATCA?
  • Foreign financial institutions (FFIs)
  • Non-financial foreign entities (NFFEs)
  • UK Trusts
  • Intergovernmental agreements (IGAs)
  • International Tax Compliance Regulations 2015
  • Reporting to HMRC
  • UK FATCA

This Practice Note provides an introduction to the Foreign Account Tax Compliance Act (FATCA) for private client practitioners and contains links to more detailed guidance.

What is FATCA?

FATCA is a US law designed to prevent tax evasion by US citizens using offshore banking facilities. The FATCA regime is contained in:

  1. Chapter 4 (Taxes to enforce reporting on certain foreign accounts) of Subtitle A (Income taxes) of Title 26 (Internal Revenue Code) of the United States Code (USM), and

  2. Final Regulations, TD 9610 (Regulations relating to information reporting by foreign financial institutions and withholding on certain payments to foreign financial institutions and other foreign entities) published on 28 January 2013 (the US Regulations). Correcting amendments to the FATCA Regulations were published on 10 September 2013.

The regime has an impact beyond the national borders of the US. It has, broadly, three core elements:

  1. enhanced due diligence

  2. broader information reporting, and

  3. a potential 30% withholding tax on (broadly) withholdable payments—that is, broadly, US source fixed or determinable annual or periodic income (and gross proceeds from certain property disposals)

A payment (or a passthru payment) can, in certain circumstances, also be subject to withholding under FATCA even if there is no direct connection to US source income. However, in December 2018, it was announced that the implementation of withholding under FATCA in respect of